It's the question of national interest again...

Krugman recently wrote about the TPP being no big deal in the NYT. An interesting aspect of that piece was relating to what constitutes "national interest" that I allude to in this blog. Talking about intellectual property rights rules in the trade agreement, it said:

"Now, the corporations benefiting from enhanced control over intellectual property would often be American. But this doesn’t mean that the T.P.P. is in our national interest. What’s good for Big Pharma is by no means always good for America."

What is "national interest" then? What is good for business can sometimes be not good for the country of the business corporation. National interest could well be larger public interest? Consumer interest? Or just plain "public interest"?

Countering Krugman's analysis generally and also specifically on the "national interest" plank, a VoxEU piece argues:

"After dismissing the case for stronger intellectual property protection in the TPP, Krugman writes with a flourish, “What’s good for Big Pharma is by no means always good for America.” Not even the Pharmaceutical Manufacturers Association would claim that its interests always coincide with US interests. 

But what about the general coincidence of interests? America’s competitive strength resides in innovation. Innovation costs lots of money; not surprisingly, some 60% of the value of US shares – or about $14 trillion in 2013 – represents the capital value of ideas, not tangible property.¹ With this amount at stake, protection of intellectual property is clearly in the US national interest. From a global perspective, it’s worth asking how future innovation will be financed if good ideas – embodied in software, entertainment, electronics, and yes, pharmaceuticals – can be freely appropriated by rival firms based in foreign countries?"

An interesting debate on what constitutes "national interest" - what constitutes it, who are it's recipients and how should it be protected? I guess all trade deals will face this question. The issue is how the interests are balanced, who balances them and whose interests ultimately prevail. 

Dominican Republic, a tobacco dispute and some observations

(courtesy - alum.mit.edu)

The debate on Tobacco Plain Packaging has reached the doorstep of the WTO dispute settlement. Australia's Plain Packaging legislation has been challenged by the Dominican republic, Honduras and Ukraine. I have blogged about it earlier here and here. A request for consultation was made in the dispute (DS441) and reports that the consultations failed have come in. So what next? Establishment of a panel.

While Dominican republic's request for consultation is found here which lays down the legal challenge to the measure, Reuters reported the statement of the Dominican Republic's Ambassador to the WTO which captured a number of issues:

"4.The plain packaging measures represent a dramatic regulatory intrusion into the appearance of products that may be sold lawfully in Australia, literally wiping design features off tobacco packaging and individual cigarettes and cigars. These design features include trademarks and geographical indications that Members have agreed to protect under the TRIPS Agreement, and which serve the valuable purpose for both producers and consumers of differentiating products that compete lawfully on the market in Australia.  

5.     Turning to the TBT Agreement, these plain packaging measures restrict international trade by eliminating competitive opportunities for tobacco products that are forced to appear in the marketplace in virtually identical retail packaging. 

6.     The WTO system ensures that measures restricting core intellectual property rights and international trade are permissible solely insofar they are effective in serving a legitimate objective. Australia's plain packaging measures do not meet this standard: they eviscerate the very function of trademarks and geographical indications and destroy competitive opportunities for tobacco products, with no credible evidence that they will reduce tobacco prevalence. Indeed, the evidence shows that the plain packaging measures will undermine Australia's goal to reduce tobacco prevalence. By commoditizing the market for tobacco products, the measures will inflict price competition, resulting in lower prices and higher consumption. Further, requiring products to be sold in similar plain packaging will facilitate illicit trade. 

7.     The Dominican Republic has requested that, rather than introduce these plain packaging measures, Australia employ tobacco control measures that would be truly effective in reducing tobacco consumption and also consistent with its WTO obligations.  Unfortunately, Australia has proceeded to introduce its plain packaging measures." 

Some observations:

1. Dominican republic's claim is that the regulatory objective of public health could be achieved by Australia even without Plain Packaging.
2. The Intellectual property rights of a developing country's products are impacted by a measure by a developed world. TRIPS being used to further developing countries interests?
3. Employment opportunities and the centrality of the tobacco industry in the economy of the Republic is being used as a point to highlight the dramatic impact the measure could have on lives and jobs.
4. This could be extended to other products like liquor and food products on the same principle and hence can be detrimental to international trade and intellectual property rights.

The statement concludes thus:

"10.     In recent years, we have witnessed a considerable development success story in our tobacco sector. Through significant investments by our producers, we have transformed our industry from being an exporter of tobacco leaf to being one of the world's premium producers of processed tobacco products, in particular cigars. Indeed, today, the Dominican Republic is the world's largest exporter of cigars. 

11.     We are proud of these achievements, and conscious also of the value of such development to the employment and income of our population. We are concerned that plain packaging will eradicate this cornerstone of our economy, whilst failing to achieve Australia's health objectives."

Trade, employment, intellectual property rights, public health objectives, interests of developing countries, domestic policy space and a dispute - this is what WTO disputes are all about!